Next Credit Crunch

[Enigma]

Whitney says credit cards are the next credit crunch

(Reuters) – Prominent banking analyst Meredith Whitney warned that "credit cards are the next credit crunch," as contracting credit lines will lower consumer spending and hurt the U.S. economy.

"Few doubt the importance of consumer spending to the U.S. economy and its multiplier effect on the global economy, but what is underappreciated is the role of credit-card availability in that spending," Whitney wrote in the Wall Street Journal.

She said though credit was extended "too freely over the past 15 years" and rationalization of lending is unavoidable, what needs to be avoided was "taking credit away from people who have the ability to pay their bills."

Whitney said available lines were reduced by nearly $500 billion in the fourth quarter of 2008 alone, and she estimates over $2 trillion of credit-card lines will be cut within 2009, and $2.7 trillion by the end of 2010.

"Inevitably, credit lines will continue to be reduced across the system, but the velocity at which it is already occurring and will continue to occur will result in unintended consequences for consumer confidence, spending and the overall economy," Whitney said.

Currently, there is roughly $5 trillion in credit-card lines outstanding in the U.S., and a little more than $800 billion is currently drawn upon, she said.

"Lenders, regulators and politicians need to show thoughtful leadership now on this issue in order to derail what I believe will be at least a 57 percent contraction in credit-card lines," she said.

Over the past 20 years, Americans have also grown to use their credit card as a cash-flow management tool, she said adding that 90 percent of credit-card users revolve a balance at least once a year, and over 45 percent of credit-card users revolve every month.

Whitney said the five lenders which dominate two thirds of the credit-card market need to work together to protect one another and preserve credit lines to able paying borrowers by setting consortium guidelines on credit.

(Reporting by Ratul Ray Chaudhuri in Bangalore)

[centex]

What I have seen being taken away from most people are lines that were not being used...in the two instances where I saw cuts, they were both accounts that basically saw no use.

If ever the use-it-or-lose-it mantra rings true, it is in the current climate.

[Qtip]

Amex is going crazy, they are hacking and slashing credit lines.

[centex]

Quote:

Originally Posted by Qtip Amex is going crazy, they are hacking and slashing credit lines.

But AXP is NOT the only ones doing it. Many lenders are doing it. The only reason AXP made the news is that they were the first and most prominent of the wave of decreases.

And...not all AXP cardholders have seen adverse action.

[spinn]

Barney Frank has introduced TARP II where the GOVT will give $1.2 trillion to bail out credit card issuers.

They will keep the money and make more $8 billion loans to Dubai while suing everyone who is more than one day late on their payments.

The good news is Nancy Pelosi does not need a credit card because she gets $25,000 private jet flights for free.

Stevie Wonder will be OK too because Obama pays him $50,000 to do Wednesday night concerts at the White House.

[spinn]

Additionally, Meredith Whitney, who told people to get out of Citibank stock three months after I did, is married to a professional wrestler, so she is not always the best barometer of intelligent decision making.

Her claims dont make much sense because there are still $4.2 trillion in unused credit lines. Cutting that to $3 trillion will not be the end of the world.

[Shane Watson]

You are right about cutting to $3 trillion but I do not wonder the wrestler had anything to do with it. And I really don't want to think that, this going out of their control.

[rescue me]

Four months later, just curious how those who thought, or considered this prospect feels now. Has any opinion changed.

If not this Christmas, next Christmas will be cancelled.

I am kidding of course, but the cuts to many who were utd, paid monthly balances, have refused to pay out of outrage, and anger, are numerous. The banks in the U.S., imho, have a population that is so angry at them that their cuts will backfire on them.

Were it not for their investment divisions, recent profit reports by banks might have been negative. I don't think, not sure, any reported profit in ther credit card divisions.

The U.S will not see the prosperity of the last many decades, as Mr. Obama stocks his staff w/ex Clinton employees, and we remain with a judiciary that is not based on knowledge, but political loyalty. We remain in the most corrupt times I have ever had knowledge of since the reform movement of the early 1900's.

Corruption rules, and the bankers are up there amongst the most devious. I think the possibility exists that a grass roots movement may eventually call for their heads alla the French revolution. Just an opinion, and everybody has one the old saying goes,,,,,,,,,,,,,

[VexatiousLitigant]

Discover just raised our CL.

[centex]

Quote:

Originally Posted by rescue me Four months later, just curious how those who thought, or considered this prospect feels now. Has any opinion changed.

Still seeing the same thing I felt many months ago...no cuts on any card. Got a notice one of the APR's was going up, but it was a PIF card anyhow that has been kept solely for age.

Have read about some Citi re-pricing but received no notices on any of my Citi accounts. One has 0% for another eleven months anyhow...

Quote:

I am kidding of course, but the cuts to many who were utd, paid monthly balances, have refused to pay out of outrage, and anger, are numerous.

That is just stupidity on the part of the customer. They really hurt themselves far more than they might hurt the bank...

The problem is that when people insist on legislation to save themselves FROM themselves, we get crap like the CCARD Act and all of its practical proving up of the law of unintended consequence. If not for CCARD, we would not be seeing the APR re-pricing that has gone on over the past few months...

[Enigma]

My cards are holding steady, a couple of them raised the rate but I PIF, still open.

Why should Christmas be canceled?? Try cash.

[rescue me]

I noticed posts that were about their own personal situations. I took the thread to be about a credit crunch nationwide.

I may have misunderstood, but I thought, and previous postings were whether the article writer was correct that the next credit crunch would involve credit cards. When the information posted by banks recently, that were it not for investment, and other divisions, the positive information released, i.e. bank profits would have been negative. All bank credit card divisions reported losses. With negative economic growth how much of that negative growth could be attributed to less use of, or charge offs of credit cards. I don't know, and as of now I don't think impact can be measured,,,,,yet.

If we had a big jump in negative economic growth than I would say that credit cards is definitely a big factor. Now? A factor, but to what extent I don't know.

I have a feeling that Commercial real estate may hit the banks hard, and soon.

I mention Christmas "cancel Chistmas" humorously, hyperbole like. The reason being that if there is a big measureable drop at that time, then credit cards would have been a factor.

Re, why anyone would not care about credit. One of my doctors told me casually once that when the time came he would not pay his unsecured debt. I was pretty surprised and when I asked him why he said "everybody does it, and when I get to a certain age, and have things set up right, I'm not paying anyone" I think Centex, presuming you are younger, that older people when they feel they have put in all their time, so to speak, have, get a feeling of deservedness that is not morally, nor logicly correct. Friend works at traffic court, and tells me that some of the older folks come in angry as a taliban forced to shave, they were not to receive tickets. They were special, deserved priveledges. Their age gave them stature, and special recognition, as she explained it.

My father would often use his service (rightly so, sometimes) in WW11 during conversation for justifying his point of view. "I did not get shot at, or bombed in France and Italy to have this so and so,,,,,,,,,,,,,,,,,,,,,,,,,,

Cash? I am amazed at how well I am doing with credit cards, don't use. Since I downsized, cut corners, budgeted I have been able to save more money than I ever have in last few years. Of course I am not paying most of my credit cards.

Food and medical were essential at the end, there were no alternatives. I think I wrote here before I was given a warning by my Dr. "Without medication, and a roof over your head, you will die". It was like descriptions you've all read when doctor informs patient of cancer diagnosis.

Buy commodities!!! I think.
Embrace the new flesh peacefully. It cannot be avoided.
Peace.